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Long-term transformation of the economy–environment nexus in Japan: a historical analysis of environmental institutions and growth regimes based on the régulation theory

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Abstract

Now that ecological crisis is evident, the issue of environment cannot be neglected in discussing growth. Based on the régulation theory, the author has proposed a theoretical framework to analyze the relationship between environmental policies and economic growth (Okuma Evol Inst Econ Rev 9:141–168, 2012). To advance research through this approach, this paper conducts a historical analysis on such a relationship in Japan. The “economy–environment nexus” is analyzed as one of the “institutional forms,” a key concept of the theory. Environmental costs are estimated as key indices. An econometric analysis using a variant of the Kaleckian growth model is conducted to analyze their effects on the growth regimes. Combining these results, we periodize and specify the economy–environment nexus in Japan, which includes (1) the 1960s to around 1970, with intensive accumulation supported by extensive consumption of environmental resources; (2) the 1970s to the early 1980s, with strict regulations formulated through conflicts, which was supportive to growth; (3) the 1990s to the early 2000s, with institutions of voluntary and flexible nature under weaker actors; and (4) after 2008, with some policies aiming at green growth as a common agenda of economic and environmental actors. This historical recognition has implications on future policies.

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Notes

  1. There are several terms used for the relationship between the economy and the environment, including “social relation to the nature,” “ecological régulation” (Becker and Raza 1999), and “economic relation to the environment” (Zuindeau 2007).

  2. A comparative analysis has been conducted by Élle et al. (2012). The current article aims to contribute to the literature with a historical analysis.

  3. Régulation theory has identified five institutional forms as important areas of institutional coordination: wage–labor nexus, monetary and financial regime, forms of competition, relations of the state with the economy, and forms of insertion into the world economy (Boyer 1986; Yamada 1991).

  4. Intermediate inputs between different environmental measures should be deducted from the total costs to estimate the exact value in accordance with the concept of vertically integrated sector of ESGSs in Okuma (2012). However, since their amounts are small, we assume them away here.

  5. SEEA 1993 proposed the maintenance cost approach, recognizing that it “corresponds to the method of calculating the value of the depreciation of produced fixed assets” (United Nations 1993, pp. 107).

  6. Cost of carbon dioxide should be regarded as a reference data by which one cannot evaluate the magnitude but observe the trend, since it is estimated using the unit cost of 6 % reduction from 1990 (Kyoto Protocol commitment) under the recognition that the immediate full-scale reduction is impossible and its cost is immeasurable (Japan Research Institute 1998, p. 158).

  7. Accordingly, domestic rents are assumed away in this model. Other ways of formalization are required to analyze resource-producing countries.

  8. Please note that a few symbols in this article are different from those in Okuma (2012). π p instead of π is used for the profit share for production-capital. F u and F r are introduced as abbreviations.

  9. This assumption is supported by the empirical fact in the 1970s’ Japan that the industries’ pollution abatement expenses were mostly covered by reduction in other costs and profits (Environment Agency1992).

  10. This model selection is also checked by Akaike information criterion (AIC) or Bayesian information criterion (BIC).

  11. It is noted that there still remains a possibility of the endogeneity problem inherent in simultaneous equation models.

  12. For W s, π, u, and v p, average values during the periods are used.

  13. Simulations can be done to understand the magnitude of these effects required for paradox of cost. As one case, a package of environmental measures with cost recovery rate of 40 % and investment-inducing effect and export competitiveness effect of 1/20 of those observed in the 1970s, where the inequality of condition is calculated as: F r(1 − ϕ) + m e + (γ eΔE/K + x e T/K)/e = 0.02 > 0, would positively impact on the profit rate.

  14. It should be noted that there are various views as to whether a Fordist regime was working in Japan, and if so, of what type.

  15. For example, the Energy-Saving Law shows guidelines to promote voluntarily activities. Electric Appliances Recycling law sets shared roles of actors where consumers pay the costs. Voluntary action plans of businesses were given outstanding importance in the national policy.

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Acknowledgments

The author would like to thank an anonymous referee for helpful comments and suggestions. It is noted that this article is an abridged version of a part of the thesis which was published as Okuma (2015) in Japanese.

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Authors and Affiliations

  1. School of Public Policy, Tohoku University, 27-1 Kawauchi, Aoba-ku, Sendai, 9808576, Japan

    Kazuhiro Okuma

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  1. Kazuhiro Okuma
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Correspondence to Kazuhiro Okuma.

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Appendix: Data sources and estimation methods

Appendix: Data sources and estimation methods

1.1 Internal pollution control cost

Following the method in Japan Research Institute (2004), we estimated the maintenance cost of the pollution abatement plant and equipment based on the accumulated value of investment. Investment was estimated by combining the ratio of investment for pollution abatement purpose to total investment in Survey of Plant and Equipment Investment (in Japanese) by the Ministry of Economy, Trade and Industry (METI) and the value of investment in the JIP database. Data from METI’s Survey of Pollution Abatement Investment (in Japanese) were also used for the earlier periods when the above-mentioned data does not exist.

1.2 Internal energy-saving cost

Following the same method as above, we estimated the maintenance cost of the energy-saving plant and equipment based on the accumulated value of investment. Investment was estimated by combining the ratio of investment for energy-saving purpose to total investment in METI’s Survey of Plant and Equipment Investment and the value of investment in the JIP database. Data from Survey on Planned Capital Spending by the Development Bank of Japan were also used for the earlier periods when the above-mentioned data does not exist.

1.3 Waste management cost

Value of intermediate input from the waste management sector to other sectors in the JIP database is used. Extension in the trend of pollution control cost and linear interpolation were also conducted for the earlier periods when the above-mentioned data does not exist.

1.4 Environmental research and development

Internal research expenditure for the purpose of environmental protection in Survey of Research and Development by the Ministry of Internal Affairs and Communications is used.

1.5 Import of natural resources

Values of import of particular items in Trade Statistics of Japan by the Ministry of Finance are used.

1.6 Maintenance cost of SOx and NOx

Following the method in Japan Research Institute (1998), we estimated the maintenance cost by multiplying emissions of SOx and NOx from fixed sources, and their unit reduction costs. As for unit reduction costs, values in 1995 were consistently used. As for emissions, we used data in Japan’s Third National Communication under the UNFCCC (for 1990 to 1999), estimation by National Institute of Science and Technology Policy referred to in Japan Research Institute (1998) (for 1970, 75, 80, and 85), and estimation by Li and Dai (2000) (for SOx before 1970), complemented by estimation using General Survey of the Emissions of Air Pollutants by the Ministry of the Environment and energy consumption data (for the rest of the years).

1.7 Maintenance cost of CO2

Following the method in Japan Research Institute (1998), we estimated the maintenance cost by multiplying excessive emission calculated as emission minus nature’s absorption, and unit reduction cost. As for unit reduction cost, one for 6 % reduction from 1990 were consistently used. As for emission, we used the data in National Greenhouse Gas Inventory Report of Japan, complemented by Borden et al. (2014) for the earlier period.

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Okuma, K. Long-term transformation of the economy–environment nexus in Japan: a historical analysis of environmental institutions and growth regimes based on the régulation theory. Evolut Inst Econ Rev 13, 217–237 (2016). https://doi.org/10.1007/s40844-016-0033-6

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